Apr 20, 2014
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Dairies are Different than the CWB Single Desk Issue

Dairies are Different than the CWB Single Desk Issue

Now that it looks like the Canadian Wheat Board’s single desk is about to be extinguished, it seems that the main stream media has turned its focus to the Canadian Dairy industry.  Is the CWB situation the same as the supply mananged dairy industry?  Should the Canadian dairy industry be in Gerry Ritz’s cross hairs next?  I say no!!!

The dairy quota system is an entirely different issue than the single desk on wheat.  Gerry Ritz will not be touching dairy quota with at least a 1000 foot pole.

Outside of Ian Cummings, farmers are not pushing for a dairy industry change.  The CWB change has been led by farmers.  Granted many farmers are fighting to save the CWB, there are a large group of farmers fighting to see the destruction of the CWB single desk.  I have asked most of my dairymen neighbors and they all agree that the quota system does prevent expansion but it does create the opportunity for dairy farms of all sizes to survive.  Creating the opportunity for larger dairies does not create the opportunity for higher industry profits.  One dairyman said to me, “why would I triple the size of my dairy in a free market to have the same amount of profit.”

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Charles Adler calls the dairy industry food inflators and compares them to OPEC in a recent video segment.  Adler will lead you to believe that the dairy industry lacks innovation because of the quota system.  To suggest that dairy farmers in Canada are lazy on profits and lack the inspiration to innovate is ridiculous.

Recently the Canadian Restaurant and Food Service Association launched a campaign called FREE OUR MILK (the video with the head of the CRFSA).  Of course the restaurant lobby wants the dairy quota extinguished.  They want to lower their cost of goods.  They can say its about protecting consumers but in reality its about cheaper food and better margins for the food retail and service industry.

Although the change of the single desk will benefit farmers, the reality is that this is really about votes.  Rural Western Canada had a large role in electing the Conservatives and therefore this change is about solidifying the conservative popularity in much of Western Canada.  Gerry Ritz will forever be remembered as the man that brought down the CWB single desk.  the conservatives campaigned on this promise and they are now doing what they promised to do.  Getting rid of milk quota does not solidify votes in the Canadian countryside.  If destroying the quota system meant more votes, the Conservatives would change their strategy.  Harper campaigned on protecting supply management so I would not expect any change to this plan.

Western Canadian farmers want change so that they have marketing choice for their wheat and dairy farmers are very satisfied with the status quo.  The CWB was a single seller, and the quota system manages supply to stabilize revenue for farmers.  These things are not the same.  The CWB single desk is being changed because many farmers believe they are more profitable without the CWB single while dairymen are significantly less profitable without the quota system.

Charles Adler is misinformed and not in line with much of his rural right wing viewers.  The dairy quota is here to stay.

 

 

 

 

About Shaun Haney

Avatar of Shaun Haney
Shaun grew up on a family seed farm in Southern Alberta. Haney Farms produces, conditions and retails wheat, barley, canola and corn seed. Shaun Haney is the founder of RealAgriculture.com.

10 comments

  1. Aside from the fact that the quota system does enable dairy farmers of all sizes to make a viable living, it is a necessary tool for a product that needs to be marketed and consumed in a short time span. If the prices are down because of oversupply, you can hold your wheat and your cabbages and your beef cattle and even your eggs, but the milk can only sit so long!
    It is time that people object to being viewed only as “consumers” Food quality and safety and sovereignty matter, much as the big food retail industries try to convince us that the “consumer” only cares about price. it’s a philosophical issue much larger than can be discussed here, but supply management and protectionism for our own Canadian farm and food products are needed now more than ever.

  2. CBC’s “The Current” did a show on this earlier in the week. It was clear in that interview that the restaurant industry is behind this recent attention.

    Wow, Sun News could use a fact checker. Obviously no one on their staff has set foot on a dairy farm – otherwise they would know that stating that the quota “kills innovation” is a complete lie.

    Or maybe they don’t worry about facts too much. But what can you expect from a news organization that doesn’t know the difference between being gauged and being gouged.

    I think the quota system has it’s problems, but obviously, as Shaun says, most dairy producers are happy with the system. As a consumer, I’m very happy to pay a bit more for my milk when I know that farmers are getting a fair price, and that the product is so tightly regulated.

    Great article, Shaun.

  3. Dairy farmers don’t need to be efficient. One exdairy farmer I knew bought a new piece of John Deere equipment every 2 months, never owned anything more than 2 years old, wife had a new car every year and he a new truck every 2 years. He told me a grain and beef farmer that I farm with junk, The average age of my equipment is somewhere in the mid 80′s. My main truck is a 92 with over 500,000 km’s. Dairy farmers buy all the new equipment they want and then supply management adds up the costs and passes it on to consumers. If us grain and cattle guys didn’t have to compete in the real world we could do the same. Someday they will have to wake up to the real world, the sooner the better.

  4. When I can buy name brand almond milk from California for not much more per litre than cow milk produced in Alberta, something is wrong! Oh, and it has a 6 month shelf life.

  5. Are you kidding Andy? It is the cheap labour in California who milk the Almond trees twice a day to get you that cheap name brand almond milk…. stuff!!

  6. Great points Shaun.

    Dean – I think a big key in your comment is you mentioned ‘exdairy farmer’ – I’ve spent my life in and around the dairy industry. The farms I know that had a similar equipment purchase/lease plan to the one you describe, I can count on one hand…and none of them survived their financial approach to be in business today.

    For the average $2 glass of milk that consumers buy in restaurants, farmers get $0.21 – with that they need to cover all their costs to produce that milk… from quota and loan payments for buildings, equipment, etc – to feed and vet – to milk transport, labour and all the other things they need to keep the lights on and the bills paid. As farm expenses rise for things like feed, fuel and electricity farmers continue to be innovative in finding ways to stay in business.

    We have a system that ties our national production growth to the demand of consumers – and while that can mean growth and expansion is sometimes slow, and that we’re stuck focusing on supplying our own national market instead of shipping milk around the world, I know these tradeoffs are worth the benefit of Canadian consumers paying less for their milk, and our farmers earning a bigger share of this, when compared with farmers in other countries.

    We only have to look to the examples of places like Australia, New Zealand and Europe that have/are removing their supply management systems to imagine life without our stable pricing system. Their farmers receive less for their milk than it costs to produce it, their consumers are paying higher prices than they did when supply management forms existed, and the folks in the middle are smiling big as they pocket the difference in the widening gap.

    Some could argue they believe consumers pay more for milk in Canada than other countries. In fact, Canadian milk prices paid by consumers have been lower than U.S. prices for 11 of the past 16 years. Not surprisingly – the 5 years when US consumer prices have been lower are years like this year, when their economy has taken a nosedive.

    While our system isn’t perfect – it does present a win-win option for everyone in the food chain from farm to table.

    • Avatar of

      Kim, thank you for your comments. Supply management is a great example of achieving balance for the farmer and the consumer. What are your thoughts on the fact it is so hard for new dairy men to enter the business?

  7. Shaun,

    You’re right – supply management is a great example of creating that fair balance along the whole supply chain.

    At face value, it’s easy for a person to say it’s ‘impossible’ for young farmers to get into dairy farming…but this argument doesn’t hold with me and here are some points why….

    First we have to look at why folks desire to get into dairy farming vs. other ag sectors and even non-ag businesses.

    Certainly, the way our dairy system is set up in Canada makes it attractive to want to be part of…what person wouldn’t want relative stability and predictability in what their income will be on each month’s milk cheque?? It sure makes it easier to calculate how to cover expenses when you’re not guessing what market swings might cut your income. Plus, with the deductions farmers pay each month for milk transport, promotion, etc., dairy farmers can concentrate on producing the best quality product they can and leave the marketing, transport, processing, etc. to a group (boards, etc.) that’s elected and hired to look after these specialized aspects.

    The catch is, having all these great benefits: stability in pricing, market, promotion, etc. comes at a cost. If it everyone could get into dairy farming and buy quota rights, these benefits would be diluted and the the sector would not be near as attractive to new entrants. It’s a bit like buying a restaurant franchise or fuel station, etc……sure many folks would love to own a Tim Horton’s or McDonalds restaurant because they can piggy back on the work others have done to build those brands and reputation…but not everyone is going to have the 6 and 7 figure dollar amounts needed to purchase those franchise rights and get going. It’s a similar idea with dairy farming. With today’s cost of quota, it’s not exactly a matter of emptying one’s pocket change to get started in dairy – it takes a lot of sacrifice to earn the equity needed to get a foot in the door. Because this is often a function of time, and the years that a person saves up to get going…it’s less likely for a young person to start fresh out of school. Now, while it’s challenging….I’m not saying it’s impossible because there are many examples of young farmers starting.
    - Some young farmers are fortunate to have family financial situations behind them that mean they’re helped to get going from scratch with family investments.
    - Other young farmers are able to work their way in over time….as hired hands on farms, usually taking significant pay cuts to in exchange for growing shares in the farm over time. I’ve seen this work for farms taking on younger family members, and also for others taking on keen new farmers that are in no way related to the original owners.
    - Most provinces have a “new entrant” programs to assist those wishing to start in dairying by providing quota matches for a set term for what’s purchased by the new farmer.
    - There are also farmers starting on their own without financial support from family, investors, existing farmers, new entrant programs, etc.because they’ve saved their pennies for years to build enough equity for a down payment to get started.

    There are certainly younger farmers getting into dairy, and it’s having an impact as I watch the influence of young farmers pulling the average age of dairy farmers down (younger) than the average age for farmers overall in Canada.

    There aren’t droves of folks starting into the sector…but it’s not just dairy farming. It’s tough to find young folks that are willing to work the long hours, 365 days and make the commitment that’s need with any type of farming.

    Plus, once young farmers get their foot in the door, it doesn’t mean it’s smooth sailing. Sure supply management stabilizes the income side of the equation….margins are still tight as expenses creep up for fuel, feed, fertilizer. If the farm can afford it, labour is still hard to find…few folks really want to be hired to do intense manual labour and to work long hours, weekends, holidays, help put in crops on those perfect beach days etc. There’s also the effect of mother nature – a bad crop year where there’s little, no, or poor quality feed can have huge impacts on milk production. That’s why you see farmers investing in technologies and finding ways to be more efficient and entrepreneurial to reduce their business risks.

    It may take a serious commitment to get into the dairy industry, there are certainly young farmers stepping up and succeeding.

  8. Kim We also get very little of the consumer dollar on our products, I believe 5-7 cents of a loave of bread in the store and in your example for sure even less when sold in a restaurant for they are another middleman. For beef it depends on the cut of beef sold, but not as good as it once was. Not sure where you live but in our US travels 4 years ago and longer when we went to the US sometimes on a monthly basis for doctor appointments we always brought milk back at way cheaper levels. I can’t speak for today prices but we will be going down again in the new year, I will have to look into it. Our closests store in the US is 1 1/2 hours away. Having quota in the CWB and only growing what Canadians need, don’t export any grain would be great, same goes for beef. Control production. Not sure how all the JOBS LOST in the export business, also gov’t taxes from income tax to city taxes would change things. I think in this economic environment that wouldn’t go over very well. But like you say being able to calculate how to cover your expenses would be so much easier. My question to you is would we have the supply managements support in putting such a plan in place? Who do we talk to to get this started? I think getting your people talking to our grain, cattle and pulse crop organizations and for sure Gerry Ritz, Stephen Harper, etc. would be a great start.Personally the idea of a stable and predictable income every month would be great. Lets get started today.

  9. Kim Have not heard your response to my questions, is the truth sometimes to hard to face. The US today due to its low dollar is having record exports not only in beef and pork but also in chicken. When our dollar was at 65 cent to the US, just imagine all the jobs from producers to processers, tranportation, etc. Canada could of build in those years that would be paid for adding more stable market for grain farmers today. I have cattle yet havn’t and will not grow feed grain to feed them again (4 years now),why when oilseed and pulse crop prices are so high. We have lost our local fed inspected packer, not able to get into supply mangement where the money is so I have moved on. I love biofuels, and if it now kills the supply mangement industry due to high feed costs, along with our cattle and pork industry so be it. After decades of living on the edge it my time to update not only my machines but also personal life with things others have taken granted for years.

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